Investor’s lessons for Worcester

Worcester’s business community feels a sibling rivalry with Boston’s that will probably never lead to a role reversal. But that does not mean Worcester can’t learn from Boston to do better.

I think the key thing Worcester can learn is what it takes to create and sustain a vital startup common. On April 30, I interviewed Todd Dagres, founder and general partner of Newbury Street-based Spark Capital, which in the first quarter of 2013 raised $450 million — more capital than almost any venture fund in the U.S.

What is a startup common? Start with the idea of the common. In old England, a common was the field in a village where farmers brought their animals to graze. If the farmers fertilized the common and their animals did not overeat, the common would be around the next year. If not, the common would perish and the village would disperse — an outcome that economists dubbed the “Tragedy of the Commons.”

What does this have to do with startups? While an imperfect analogy, you start by substituting entrepreneurs for a farmer’s animals. If a city or region supplies its entrepreneurs with sufficient capital, advice and other resources, some will succeed. If the successful entrepreneurs choose to reinvest, then the startup common will help create the next generation of entrepreneurs. But if the successful entrepreneurs take their money, buy a big boat and leave town, the startup common will perish, and its entrepreneurs will move elsewhere to make their fortunes.

Worcester once had a vibrant startup common. In 1930, Norton Co. and Wyman-Gordon made the city the world’s leading producer of abrasives and crank shafts for automobiles.

But Worcester’s startups grew into huge companies that resisted change. For example, as corporate marketer Michael Donovan explained, “The big 10 in Worcester employed low-paid laborers from Sweden. In 1952, when Massachusetts wanted to build the Mass. Pike through Worcester, those big 10 nixed the plan because they were afraid it would help their Swedish workers unionize or get better jobs elsewhere and it would spur new competitors.”

But in a 2007 T&G interview, the author of a book on the Mass. Turnpike, Yanni K. Tsipis, attributed the Worcester bypass to revenue projections that fell below the cost of “all the land takings you’d have to do in Worcester” to build a Pike exit through town.

Whether Mr. Donovan’s or Mr. Tsipis’ story is true, Norton and Wyman-Gordon are now subsidiaries of companies headquartered elsewhere. The Worcester startup common went into hibernation; many of its entrepreneurs left town.

As the Worcester startup common waned, Boston’s waxed: In the 1970s and 1980s, Maynard’s Digital Equipment Corp. boomed, spawning a robust minicomputer industry that perished once companies replaced minicomputers with networks of PCs. Fortunately for Hopkinton, EMC remains as a significant remnant in the related field of data storage.

He does not see venture capitalists investing in Worcester. For example, if he were going to invest in an enterprise software company, he would choose Westford or Littleton “because employees do not want to drive as far as Worcester, and the ecosystem and the community are not there.”